The Slow Stochastic charts the daily stochastic as well as a five-day moving average of a 12-day interval. This smoothing of the Stochastic Oscillator is an attempt to reduce volatility and improve signal accuracy.
As with the other stochastic indicators, the signals to look for are oversold securities with values are less than 20 and overbought when greater than 80.
Stochastics work best in broad trading ranges, or in a mild trend with a slight upward or downward bias. The worst market for normal use of stochastics is a persistent trending market that has only minor corrections. It is possible to trade stochastics in a trend by ignoring the usual overbought and oversold levels and entering the market when the end of a reaction against the trend is signaled by a stochastic crossover from any level.